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FHFA Joint AG Letter

FHFA Joint AG Letter

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Published by DinSFLA

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Published by: DinSFLA on Mar 18, 2013
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March 15, 2013
President Barack ObamaThe White House1600 Pennsylvania Avenue NWWashington, D.C. 20500The Honorable Harry Reid
Senate Majority LeaderS-221 U.S. Capitol
Washington, D.C. 20510The Honorable Mitch McConnellSenate Minority LeaderS-230 U.S. CapitolWashington, D.C. 20510
New, permanent leadership at Federal Housing Finance Agency
Dear President Obama, Senate Majority Leader Reid, and Senate Minority Leader McConnell:We write to urge you to expeditiously appoint and approve new, permanent leadership to
the Federal Housing Finance Agency (FHFA). As state Attorneys General, we have spent the
last several years grappling with the negative impacts of subprime and predatory lending
practices and the resulting foreclosure crisis. Through actions against major banks and financial
institutions, as well as innovative policy initiatives, we have brought a measure of relief tohomeowners and stability to our economy.Loan modifications are a key component of bringing relief to distressed borrowers and
spurring our nation's economic recovery. These modifications have generally relied on a net-
present value (NPV) analysis, which serves the dual purposes of helping borrowers remain in
their homes and meeting the economic interests of lenders and investors. We have seen firsthand
the positive impact of mortgage modifications, often including principal write-downs, on ourhousing market, economy, and communities. In fact, principal write-downs are a centralcomponent of the national settlement, negotiated by the federal government and a bi-partisangroup of 49 state attorneys general, that was entered into with five major banks approximately
one year ago.
When loan modifications employ principal write-downs as necessary to create anaffordable modified loan, countless more families will avoid unnecessary foreclosure.Unfortunately, under the leadership of Acting FHFA Director Edward DeMarco, Fannie Mae andFreddie Mac remain an obstacle to progress by refusing to adopt policies that will help maximize
relief for homeowners. In particular, FHFA's refusal to adjust its policies to allow for principalforgiveness and forbearance stands as a major impediment to addressing the foreclosure crisis.FHFA's continued position that principal forgiveness conflicts with its goal of assetpreservation is not supported by reality.
The FHFA's current policy actually reduces thevalue of its holdings portfolio. It is far more profitable for any fmancial institution to holda portfolio of performing $200,000 mortgages that keeps families in their homes than aportfolio of non-performing $250,000 mortgages headed toward default.
FHFA's recalcitrance remains despite overwhelming evidence that mortgagemodifications guided by a net-present value analysis, often including principal write-downs,
provide significant dividends. Moreover, FHFA's refusal to consider principal write-downs aspart of a comprehensive mortgage modification policy is inconsistent with its combined goal ofasset preservation and foreclosure prevention. Simply put, by refusing to allow for principal
write-downs that would result in more loan modifications, FHFA stands as a direct impedimentto our economic recovery.We have worked tirelessly, along with our federal, state, and local partners to develop amulti-pronged approach to dealing with the foreclosure crisis. Fannie Mae and Freddie Macshould be among our partners in this effort, and leaders in the arena of loan modification best
practices. Instead, they have been an obstruction. We believe that until new, permanent
leadership is named to FHFA, they will continue to stand as a roadblock to comprehensively
addressing the foreclosure crisis.
Thank you for your consideration.
Martha Coakley
ric T. SchneidermanMassachusetts Attorney General
ew York Attorney GeneralKamala D. Harris
oseph R. "Beau" Biden, III
California Attorney General
elaware Attorney General
Lisa Madigan
ouglas F. GanslerIllinois Attorney General
aryland Attorney General

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